Bush tax cuts of 2001

The Economic Growth and Tax Relief Reconciliation Act was designed to give tax breaks to business owners and the upper class in an effort to stimulate the market. Although some experts argue that the act initially helped the economy, many note that it had negative effects by reducing government revenues.

The Economic Growth and Tax Relief Reconciliation Act (EGTRRA), signed into law on June 7, 2001, by George W. Bush, George W.Bush, affected many areas of the tax code. The two major changes were the elimination of the estate tax and a decrease in income tax rates. The law also altered other aspects of the tax code, including the basis of inherited property, the marriage penalty, child tax credits, pension plans, education savings accounts, and the alternative minimum tax.Economic Growth and Tax Relief Reconciliation Act of 2001Taxation;tax cuts of 2001

The estate tax is to be phased out under the provisions of the tax cuts. Before the passage of the act, an estate worth less than $675,000 was exempt from estate taxes, while significantly larger estates could pay taxes at rates of over 50 percent. The act slowly increased the exemption amount for estates and decreased the tax rate over a number of years. By 2009, all estates worth less than $3.5 million were to be exempt from paying estate taxes, and the maximum amount of tax that larger estates will have to pay is not to exceed 45 percent.

EGTRRA was also designed to reduce Income tax;personalincome taxes over the course of several years. By 2006, individuals who were paying 28 percent of their income in taxes saw their tax rate reduced to 25 percent. Those in slightly higher tax brackets (31 percent and 36 percent) also had their taxes reduced by 3 percent. The biggest tax cut went to those who had higher incomes and were paying 39.6 percent of their income in taxes. These individuals saw their taxes decrease by 4.6 percent.

The two major components of EGTRRA, the elimination of the estate tax and a reduction in income tax rates, strongly favored those in the highest income brackets. The 2001 tax cuts were a short-term fix that was designed to generate economic growth, but as of 2008, this plan had not safeguarded the economy from decline. Additionally, in 2010, the tax cuts are due to expire, and in the absence of further action by Congress, the tax rates are to return to pre-2001 levels.

Corporate income tax

Personal income tax

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September 11 terrorist attacks

Supply-side economics


Trickle-down theory